17th May 2006 07:00
17 May 2006LogicaCMG Annual General Meeting: Update on Current TradingAhead of its Annual General Meeting for shareholders this afternoon, LogicaCMGhas issued the following trading statement:(Comparisons to 2005 revenue are on a pro forma basis, as if Unilog and Edinforwere consolidated from 1 January 2005).Trading in the early months of 2006 has been well ahead of last year. We haveexperienced a continuation of the demand seen in 2005 for IT services in ourmajor markets. In the UK, we have announced a significant new contract with theMinistry of Defence valued at ‚£80m over 10 years and in the Netherlands, aMemorandum of Understanding (MoU) with ING leading to a contract that isexpected to be worth 200m Euros over 6 years. The ING MoU is indicative ofcontinuing strong demand in financial services and a confirmation of ourability to win outsourcing projects of scale in mainland Europe. Demand hasalso been improving in shorter term consulting and project assignments.First quarter organic revenue growth for the group has been strong at 9.7%,although this has benefited from a higher number of working days, with theEaster holiday falling in the second quarter. Drivers of revenue in the UK inthe first quarter were Financial Services and Industry, Distribution andTransport (IDT). Revenue performance in our business in the Netherlands wasstrong across all sectors. In France, first quarter revenue growth from thecombined LogicaCMG and Unilog business was in line with our expectations,benefiting from a market that continues to perform well. Despite a complexintegration process, revenue in Germany was stable. We also saw increasedrevenue in Asia as we began delivery of our contract with telecoms operatorNatrindo. Telecoms Products revenue was just ahead of last year. We remaincautious about the growth prospects for Telecoms Products in 2006 given thebalance of mature and emerging revenue streams in the business.Following a strong first quarter, we expect 2006 organic revenue growth for thegroup to be ahead of last year's 5.3%. We are continuing to recruit in all ourmajor businesses but the improving market conditions are resulting in atightening labour market and inevitably there is increased use of contractlabour to satisfy demand. In 2005, group operating margin on a pro-forma basiswas 7.2% with the first half at 5.3%, reflecting the normal seasonality in ourbusiness. Additionally in 2006, the cost savings from the Unilog acquisitionwill largely benefit the second half. While we expect some first half marginimprovement in 2006 over last year, the profile of operating profit between thefirst and second halves is likely to follow the normal seasonal pattern.Overall, our expectations for 2006 remain unchanged.As announced earlier this year, Unilog formally joined the LogicaCMG group on13 January 2006. We are progressing with a formal squeeze-out of the remainingshareholders. The filing of a buyout offer with the AMF was announced on 28April 2006. Progress with our integration plan is in line with expectations.The assimilation of the former LogicaCMG business in France into the Unilogstructure is progressing well. We are encouraged by the early evidence ofrevenue synergies from the combination of LogicaCMG's vertical market expertiseand the depth of Unilog's customer relationships. Contracts exploiting thesesynergies which have already been signed include an outsourcing contract withFrench supermarket group Carrefour, an SAP contract with network operator SFRand an IT consulting contract with travel provider Carlson Wagonlit Travel. TheGerman integration process is, as expected, more complex. We have nowestablished a unified country board in Germany running lines of business intraining, outsourcing, consulting and systems integration. The areas of overlapare chiefly in the latter two lines of business where both companies hadsignificant operations. These are also the businesses with the greatestpotential for cost savings in Germany. Across the group, we expect to achieveour planned annualised acquisition cost savings of ‚£19m, of which ‚£10m will bedelivered in 2006, with a total cost to achieve the savings of ‚£28m.In accordance with normal practice, the company will give a further tradingupdate in late July, prior to entering a close period ahead of its interimresults. The interim results are scheduled to be released on 30 August 2006.Dr. Martin Read, Chief Executive, said:"Trading in the early months of 2006 has been well ahead of last year. Ourintegration of the Unilog business is proceeding as planned and we areencouraged by the potential of the Unilog acquisition. Overall, ourexpectations for the full year remain unchanged."For further information, please contact:Media relationsCarolyn Esser +44 (0) 20 7446 1786 (mobile: +44 (0) 7841 602391)Investor relationsKaren Keyes/Frances Gibbons +44 (0) 20 7446 4341 (mobile: +44 (0) 7801 723682)Citigate Dewe RogersonToby Mountford/Seb Hoyle +44 (0) 20 7638 9571 (mobile: +44 (0) 7710 356611)ENDLOGICACMG PLCRelated Shares:
LOG.L